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Dave Schuelke . . . “We’re opening a bank at a time when many other banks are pulling back.”

Rich Kirchen

In mid-2006, the economy was roaring, real estate prices were escalating and a group of bank executives and business owners decided to start a new bank in Brookfield. Spring Bank finally opened in September, and its executives really believe the timing is better than ever.

That’s right — September, which was one of the worst months in banking and financial market history. While acknowledging the economy “has its problems,” Spring Bank president and chief executive officer Dave Schuelke insists it’s a “good time” to open.

He said profit margins on business loans actually have improved from the real estate market bubble when banks cut interest rates to win business. And, with many banks tightening credit standards, Spring Bank has flexibility through its clean-slate capital structure to make loans up to its legal limit of $2 million each.

“We’re opening a bank at a time when many other banks are pulling back,” Schuelke said. “The competition is not at the same level it was two years ago.”

Executives with other banks and financial firms find Spring Bank’s basic premise plausible. They say the bank will face hurdles of a slow-growing economy, heavy competition among banks for deposits and a nonexistent track record.

“We’re in a tough environment, but is there business out there?” said Jon Bruss, CEO of Fortress Partners Capital Management, Hartland. “There certainly is.”

Bruss, who has started banks and now runs an investment and portfolio management firm, said many businesses need financing to expand and haven’t been able to attain it from their existing bank. That’s where a community bank can grab market share.

Met startup goal

Spring Bank is not immune from the trends of the economy and capital markets.

Reaching the bank’s goal of raising $12 million to $13 million in startup capital from private investors took about a month longer than planned and finished at $12.5 million, Schuelke said. The bank had 190 buyers of shares for $12,500 each with a minimum two-share purchase.

Many of the shareholders are small-business owners who provide an instant core clientele for the bank, Schuelke said.

Spring Bank accomplished that in the same time frame that another southeast Wisconsin bank — Lake Shore Bank in Sheboygan — has been unable to attain its capital raising goal of $15 million.

Spring Bank had hoped to open an office in a new commercial development at the corner of Moorland Road and Greenfield Avenue late this year, but the developer, like many developers these days, has delayed the project, Schuelke said. For now, the bank’s 10 employees work from 3,200 square feet in a one-story office building at 16655 W. Wisconsin Ave., Brookfield.

The president of another Brookfield bank agrees that the unsettling economic environment can offer opportunities, as well as risks.

“The best of loans are made in the worst of times,” said Bruce Lammers, CEO of Ridgestone Bank. “But these are unknown times.”

Spring Bank executives acknowledge the challenge of attracting new deposits to expand its capital base. Deposits include money-market funds, certificates of deposit and checking and savings accounts.

Other banks are offering higher interest rates than Spring Bank’s 3 percent on a money-market account with a $50,000 minimum balance, but the bank’s executives believe they’re in the top quartile.

Spring Bank will need to walk a fine line competing for business on price while not hurting profit margins, said Bruss.

“They’re going to have to steal it from somebody else,” Bruss said.

Kurt Andrae, president and CEO of First Wisconsin Bank & Trust, a three-year-old Brookfield bank, agreed that raising deposits is the most difficult challenge today.

“People are worried about safety, and a lot of people want to look at how long a bank has been around,” Andrae said. “That’s something they’re going to have to address.”

Focus on small business

Spring Bank’s business plan, like that of several other banks that have opened in the area in recent years, is to target small-business customers and affluent individuals with one-on-one banker-to-customer relationships. One reason the bank’s executives are confident is that Brookfield-area banks recorded double-digit deposit growth in 2006 and 2007, Schuelke said.

The bank’s top executives all have extensive experience, which they plan to apply to winning well-qualified business customers.

Schuelke is a former executive with JP Morgan Chase. Executive vice president and lead business banker Dean Zwick is a former senior vice president at Tri City National Bank, Oak Creek. Chief financial officer Greg Miesek was vice president of finance for eight years at InvestorsBank in Waukesha.

Since opening on Sept. 2, Spring Bank has attracted banking relationships with businesses in real estate, commercial development and manufacturing. Spring Bank has seen little demand for new commercial real estate projects, a sector that’s slowed to a crawl, Schuelke said. The bank has refinanced existing commercial properties and business owner-occupied real estate, he said.

Spring Bank told investors that it will record its first profitable quarter by its second full year in business and be profitable for the entire third year. The bank projects its assets will reach $100 million by the end of the third year, which would rank the bank with numerous community-sized banks in the area.

Spring Bank was known as State Bank of Wisconsin during its formative and capital-raising phases, but executives decided to change the name to the more distinctive new title, they said. They’ve hired Jigsaw, a Milwaukee advertising agency, to create an ad campaign.

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